Courts can’t relax the terms of Insurance policy: National consumers’ body

Observing that courts cannot alter the terms of an insurance policy, the National Consumer Disputes Redressal Commission (NCDRC) last week struck down an order of the Maharashtra State Consumer Disputes Redressal Commission directing an insurance company to pay the claim amount of Rs 55.19 lakh to a diamond trader from Surat.

“A consumer forum or any court for that matter, does not have power to relax the warranty clause or any terms and conditions of an insurance policy,” said NCDRC bench of presiding member Prem Narain and member C Vishwanath, after finding that the state commission had tried to bypass the warranty clause in the policy drawn by Surat based diamond trader, M/s. Dharmanandan Diamonds Private Limited.

The firm had on June 10, 2002, handed over 418 carat polished diamonds worth Rs 78.62 lakh to one of its commission agents, Arjanbhai Mangukia, who was supposed to show the diamonds to some prospective clients in Mumbai. Arjanbhai then came to Mumbai along with the diamonds. On the next day, he, however, was found murdered at his rental premises in Mumbai, and since police did not find the diamonds with him, the firm lodged a claim of Rs. 78.62 lakh with its insurer, New India Assurance Company Ltd.

The insurance company appointed a surveyor to assess the loss, which came to be assessed at Rs 55.19 lakh. The company, however, repudiated the claim on the ground of breach of the warranty clause - the polished diamonds were not secured in a standard safe, as required under the terms of the policy. There was no standard safe at the rental premises of the firm’s commission agent.

The firm then filed a consumer complaint with the state commission, which allowed the complaint on October 30, 2015, and directed the insurance company to pay the firm--the loss assessed by its surveyor--- Rs 55.19 lakh. Both the diamond trader and the insurance company had challenged the order before NCDRC. While the insurance company was aggrieved by the order of payment, the firm sought full amount of claim, Rs 78.62 lakh, instead of Rs 55.19 lakh awarded by the state commission.

NCDRC upheld the stand of the insurance company that in view of the breach of terms of the policy, the claim was rightly repudiated and no amount was payable to the firm. It seems that the State commission has agreed with the assertion of the complainant that the condition of the warranty was impractical and could not be observed as main work of the commission agent was to show the diamonds to prospective buyers and therefore, it was not possible to keep the diamonds in standard safe all the time, said NCDRC.

It said the argument did not hold good in the case, as the diamonds were given to the commission agent at Surat, from where the precious stones were brought to Mumbai, where the agent was to stay for the whole week. Clearly, when the diamonds were to be kept at a residence, they were required to be kept under locked safe of standard make as per the warranty condition of the policy, but there was no safe at Mumbai premises of the deceased agent, it added.

“We are of the considered opinion that the warranty mentioned in the policy has been breached and therefore, the insurance claim is not payable,” it concluded.

Source: Hindustan times